Student loans are a big burden on debtors, even for those filing bankruptcy. But there are some things you can do to get relief now and possibly in the future.
While it’s not impossible, it’s extremely difficult to get bankruptcy relief for student loans. Debtors seeking student loan forgiveness will need to demonstrate that it would be an undue hardship to repay the loan. Every court has its own way of determining undue hardship. One commonly used approach is to use the Brunner test. The test considers whether the following conditions are met:
- Paying the student loans would prevent the debtor from maintaining a minimal standard of living.
- There is proof that the circumstances currently preventing the debtor from paying their student loans are likely to continue throughout a significant portion of the repayment period.
- The debtor has made a good faith effort to repay their student loans for at least five years.
If the bankruptcy debtor fails to meet even one of those criteria, they will most likely be denied a discharge for the student loans.
Income Contingent Repayment
Fortunately, many federally-backed student loans offer income contingent repayment plans that allow debtors to repay their loans according to how much they earn. Their monthly payments could be as low as $0 per month.
Many lawmakers have introduced bills that would make it easier for student loan debtors to discharge their loans in bankruptcy. Most recently, Rep. John Delaney, D-Maryland introduced HR 449 “Discharge Student Loans in Bankruptcy Act,” which, if passed, would make it easier for debtors to get student loan relief.
If you’re currently struggling to repay your student loans, don’t ignore them. Student loan creditors have a lot of power to garnish your wages and levy your assets. Try to work out a repayment arrangement, and, if you’re in bankruptcy, work with your attorney to come up with an effective plan.